The Problem of Debt as We Reach Oil Limits

(This is Part 3 of my series – A New Theory of Energy and the Economy. These are links to Part 1 and Part 2.)

Many readers have asked me to explain debt. They also wonder, “Why can’t we just cancel debt and start over?” if we are reaching oil limits, and these limits threaten to destabilize the system. To answer these questions, I need to talk about the subject of promises in general, not just what we would call debt.

In some sense, debt and other promises are what hold together our networked economy. Debt and other promises allow division of labor, because each person can “pay” the others in the group for their labor with a promise of some sort, rather than with an immediate payment in goods. The existence of debt allows us to have many convenient forms of payment, such as dollar bills, credit cards, and checks. Indirectly, the many convenient forms of payment allow trade and even international trade.

Figure 1. Dome constructed using Leonardo Sticks

Figure 1. Dome constructed using Leonardo Sticks

Each debt, and in fact each promise of any sort, involves two parties. From the point of view of one party, the commitment is to pay a certain amount (or certain amount plus interest). From the point of view of the other party, it is a future benefit–an amount available in a bank account, or a paycheck, or a commitment from a government to pay unemployment benefits. The two parties are in a sense bound together by these commitments, in a way similar to the way atoms are bound together into molecules. We can’t get rid of debt without getting rid of the benefits that debt provides–something that is a huge problem.

There has been much written about past debt bubbles and collapses. The situation we are facing today is different. In the past, the world economy was growing, even if a particular area was reaching limits, such as too much population relative to agricultural land. Even if a local area collapsed, the rest of the world could go on without them. Now, the world economy is much more networked, so a collapse in one area affects other areas as well. There is much more danger of a widespread collapse.

Our economy is built on economic growth. If the amount of goods and services produced each year starts falling, then we have a huge problem. Repaying loans becomes much more difficult.

Figure 2. Repaying loans is easy in a growing economy, but much more difficult in a shrinking economy.

Figure 2. Repaying loans is easy in a growing economy, but much more difficult in a shrinking economy.

In fact, in an economic contraction, promises that aren’t debt, such as promises to pay pensions and medical costs of the elderly as part of our taxes, become harder to pay as well. The amount we have left over for discretionary expenditures becomes much less. These pressures tend to push an economy further toward contraction, and make new promises even harder to repay.

The Nature of Debt

In a broad sense, debt is a promise of something of value in the future. With this broad definition, it is clear that a $10 bill is a form of debt, because it is a promise that at some point in the future you, or the person you pass the $10 bill on to, will be able to exchange the $10 bill for something of value. In a sense, even gold coins are a promise of value in the future. This is not necessarily a promise we can count on though. At times in the past, gold coins have been confiscated. Derivatives and other financial products have characteristics of debt as well.

To understand how important debt is, we need to think about an economy without debt. Such an economy might have a central market where everyone brings goods to exchange. But even in such an economy, there will be a problem if there is not a precise matching of needs. If I bring apples and you bring potatoes, we could exchange with each other (“barter”). But what if I don’t have a need for potatoes? Then we might need to bring a third person into the ring, so each of us can receive what we want. Because barter is so cumbersome, barter was never widely used for everyday transactions within communities.

An approach that seemed to work better is one mentioned in David Graeber’s book, Debt: The First 5,000 Years. With this system, a temple would operate a market. The operator of the market would provide a “price” for each object, in terms of a common unit, such as “bushels of wheat.” Each person could bring goods to the market (and perhaps even services–I will work for a day in your vineyard), and have them exchanged with others based on value. No “money” was really needed because the operator would take a clay tablet and on it make a calculation of the value in “bushels of wheat” of what a person brought in goods, The operator would also calculate the value in “bushels of wheat” that the same person was receiving in return, and make certain that the two matched.

Of course, as soon as we start allowing “a day’s worth of labor ” to be exchanged in this way, we get back to the problem of future promises, and making certain that they really happen. Also, if we allow a person to carry over a balance from one day to another–for example, bringing in a large quantity of goods that cannot be sold in one day–then we get into the area of future promises. Or if we allow a farmer to buy seed on credit, with a promise to pay it back when harvest comes in a few months, we again get into the area of future promises. So even in this simple situation, we need to be able to handle the issue of future promises.

Future Promises Even Before Debt

Whenever there is division of labor, there needs to be some agreement as to how that division will take place–what are the responsibilities of each participant. In the simplest case, we have hunters and gatherers. If there is a decision that the men will do the hunting and the women will do the gathering and care for children, then there needs to be an agreement as to how the arrangement will work. The usual approach seems to have been some sort of “gift economy.” In such an economy, everyone would share whatever they were able to obtain with others, and would gain status by the amount they could offer to share.

Instead of a formal debt being involved, there was an understanding that if people were to participate in the group, they had to follow the rules that the particular culture dictated, including, very often, sharing everything. People who didn’t follow the rules would be thrown out. Because of the difficulty in living in such an environment alone, such people would likely die. Thus, participants were in some sense bound together by the customs that underlay gift economies.

At some point, as more of an economy was built up, there would be a need for one or more leaders, as well as some way of financially supporting those leaders. Thus, there would need to be some sort of taxation. While taxation to support the leader would not be considered debt, it has many of the same characteristics as debt. It is an ongoing payment obligation. The leader and the other members of the group plan their lives as if this situation is going to continue. In a way, the governmental services and the resulting taxation help bind the economy together.

Benefits of Debt

The benefits of debt are truly great, including the following:

  1. Debt allows transactions to take place that are not precisely at the same time and place. I can order goods and have them delivered to my home. An employer can pay me for a month’s work with a check, rather than needing to give me food or some other barter item corresponding to each hour I work. There is no need to have billions of gold coins (or other agreed up metal currency) to facilitate each and every transaction, and to transport around. We can each have bank accounts. From the bank’s perspective, the amount in a bank account is a liability (debt) owed to the depositor.
  2. Additional debt gives additional purchasing power to individuals, governments or businesses. The additional funds available can be spent immediately. Very often, repayment (with interest) is spread over several years, making goods that would not be affordable, affordable. Thus debt raises “demand” for goods and also for the commodities used to create these goods.
  3. Because debt makes goods more affordable, additional debt tends to “pump up” the price of commodities. These higher prices make it worthwhile for businesses to extract more minerals (including fossil fuels) from the earth, and make it worthwhile to plant more acres of food. Debt, particularly cheap debt, makes building new factories and opening new mines more affordable for businesses.
  4. Debt allows a steep step-up in standard of living, such as that obtained by adding coal or oil to an economy. Debt allows goods to be purchased that will substantially change a person’s future, such as transit to a new country, or purchase of a college education, or purchase of a delivery vehicle that can be used to start a business. Without debt, it is unlikely that fossil fuels could ever have been extracted; consumers would never have been able to afford the goods provided by fossil fuels, and businesses would have had difficulty financing the many new factories required to make goods using these fuels. See my post, Why Malthus Got His Forecast Wrong.
  5. Adding debt is self-reinforcing. Suppose a considerable amount of debt is added for what is deemed a good purpose, such as extracting oil in North Dakota. Oil companies will use the debt they receive for many different purposes–including paying employees, paying royalties to land owners, and paying taxes to the state. Employees will buy new houses and cars, taking out loans in the process. North Dakota residents who receive royalty payments may decide to take out home improvement loans to fix up their homes, expecting that the royalties will continue. The state may fix its roads with its revenue, giving additional income (which may lead to more debt) to road workers. A grocery chain may decide to build a new store (borrowing money to do so), further pushing the chain along. What happens is that indirectly, the new oil company debt makes a lot of people at least temporarily wealthier. These temporarily wealthier individuals can then “qualify” for more in loans than would otherwise be the case, giving them more to spend, and allowing yet others to qualify for loans.
  6. Arrangements that are not debt, but more of the nature of contingent debt, make people feel more confident of the current system. There are insurance programs for pension programs and for bank accounts, up to a selected balance per account. These insurance programs generally don’t have very much money in them, relative to what they are insuring. But they make people feel good, especially if there is a government that might come in and take over, beyond the actual funding of the insurance program.

What Goes Wrong with Debt and Other Financial Promises

1. As mentioned at the beginning of the post, debt works very badly if the economy is contracting.

It becomes impossible to repay debt with interest, without reducing discretionary income. Government programs, such as health care for the elderly, become more expensive relative to current incomes as well.

2. Interest payments on debt tend to transfer wealth from the poorer members of society to the richer members of society.

Economists have tended to ignore debt, because it represents a more or less balanced transaction between two individuals. The fact remains, though, that the poorer members of society find themselves especially in need of debt, and many pay very high interest rates. The ones lending money tend to be richer. Because of this arrangement, over time, interest payments tend to increase wealth disparities.

3. All too often, the payment stream upon which debt depends proves unsustainable.

In the example given above, everyone thinks the North Dakota oil will continue for a while, so takes out loans as if this is the case. If it doesn’t, then this is an “Oops” situation.

In the case of US student loans, many students are never able to get jobs with high enough wages to pay back the loans they were given.

4. Governments tend to put programs into place that are more expensive than they really can afford, for the long term.

As an economy gets wealthier (because of more fossil fuel use), there is a tendency to add more programs. Representative government is used instead of a monarch. Medical care and pensions for the elderly are added, as are unemployment benefits, and more advanced levels of schools.

Unfortunately, it is hard to properly estimate what long-run cost of these programs will be. Also, even if the programs were affordable with a high level of fossil fuels, they almost certainly will not be affordable if energy availability declines. It is virtually impossible to roll programs back, even if they are not guaranteed, once people plan their lives on the new programs.

Figure 3 shows a graph of US government spending (all levels) compared to wages (including amounts paid to proprietors, including farmers). I use this base, rather than GDP, because wages have not been keeping up with GDP in recent years. The amounts shown include programs such as Social Security and Medicare for the elderly, in addition to spending on things such as schools, roads, and unemployment insurance.

Figure 3. Comparison of US Government spending and receipts (all levels combined) based on US Bureau of Economic Research Data.

Figure 3. Comparison of US Government spending and receipts (all levels combined) based on US Bureau of Economic Research Data.

Clearly, government spending has been rising much faster than wages. I would expect this to be true in many countries.

5. There is no real tie between amounts of debt issued and what will actually be produced in the future. 

We are told that money is a store of value, and that it transfers purchasing power from the present to the future. In other words, we can count on balances in our bank accounts, and in fact, in all of the paper securities that are outstanding.

This story is only true if the economy can continue to create an increasing amount of goods and services forever. If, in fact, the production of goods and services drops off dramatically (most likely because prices cannot rise high enough to encourage enough extraction of commodities), then we have a major problem.

In any year, all we have available is the actual amount of resources that can be pulled out of the ground, plus the actual amount of food that can be grown. Together, these amounts determine how many goods and services are available. Money acts to distribute the goods that are available. Presumably, the people who work at extraction and production of these goods and services need to be paid first, or the whole process will stop. This basically leaves the “leftovers” to be shared among those who are now being supported by tax revenue and by those who hold paper securities of some sort or other. It is hard to see that anyone other than the workers producing the goods and services will get very much, if we lose the use of fossil fuels. Workers will become less efficient, and production will drop by too much.

6. Derivatives and other financial products expose the financial system to significant risks.

Certain large banks have found that they can earn considerable revenue by selling derivatives and other financial products, allowing people or businesses to essentially gamble on certain outcomes–such as the price of oil falling below a certain price, or interest rates rising very rapidly, or a certain company failing. As long as everything goes well, there is not a huge problem. The concern now is that with rapidly changing commodity prices, and rapidly changing levels of currencies, companies may fail and there may be major payouts triggered.

In theory, some of these payments may be offsetting–money owed by one client may offset money owed to another client. But even if this is the case, these defaults can sometimes take years to settle. There may also be issues with one of the parties’ ability to pay.

One particular problem with many of the products is the use of the Black-Scholes Pricing Model. This model is applicable when events are independent and normally distributed. This is not the case, when we are approaching oil limits and other limits of a finite world.

 7. Governments tend to be badly affected by a shrinking economy, so may be of little assistance when we need them most.

As noted previously, payments to governments act very much like debt. As an economy shrinks, programs that seemed affordable in the past become less affordable and badly need to be cut. Thus, governments tend to have problems at the exactly same time that banks and other lenders do.

Governments of “advanced” countries now have debt levels that are high by historical standards. If there is another major financial crisis, the plan seems to be to use Cyprus-like bail-ins of banks, instead of bailing out banks using government debt. In a bail-in, bank deposits are exchanged for equity in the failing bank. For example, in Cyprus, 37.5% of deposits in excess of 100,000 euros were converted to Class A shares in the bank.

This approach has a lot of difficulties. Businesses have a need for their funds, for purposes such as paying employees and building new factories. If their funds are taken in a bail-in, the ability of the business to continue may be damaged. Individual consumers depend on their bank balances as well. As noted above, deposit insurance is theoretically available, but the actual amount of funds for this purpose is very low relative to the amount potentially at risk. So we get back to the issue of whether governments can and will be able to bail out banks and other failing financial institutions.

8. More debt is needed to hide the lack of economic growth in an ailing world economy. This debt becomes increasingly difficult to obtain, as wages stagnate because of diminishing returns. 

If wages are rising fast enough, wages by themselves might be used to pump demand for commodities, and thus raise their prices. Our wages are close to flatmedian wages have been falling in the US. If wages aren’t rising sufficiently, increasing debt must be used to raise demand. Debt is growing slowly in the household sector, according to figures compiled by McKinsey Global Institute. Household debt has grown by only 2.8% per year between Q4 2007 and Q4 2014, compared to 8.5% per year in the period between Q4 2000 and Q4 2007.

Even with business demand included, debt isn’t rising rapidly enough to keep commodity prices up. This lack of sufficient growth in debt (and lack of growth in demand apart from growing debt) seems to be a major reason for the drop in prices since 2011 in many commodity prices.

9. Differing policies with respect to interest rates and quantitative easing seem to have the possibility of tearing the world financial system apart.

In a networked economy, not moving too far from the status quo is a definite advantage. If the US’s policies have the effect of raising the value of the dollar, and the policies of other countries have the tendency to lower their currencies, the net effect is to make debt held in other countries but denominated in US dollars unpayable. It also makes goods sold by American companies unaffordable.

The economy, as it exists today, has been made possible by countries working together. With sanctions against Iran and Russia, we are already moving away from this situation. Low oil prices are now putting the economies of oil exporters at risk. As countries try different approaches on interest rates, this adds yet another force, pulling economies apart.

10. The economy begins to act very strangely when too much of current income is locked up in debt and debt-like instruments.

Economic models suggest that if oil prices drop, demand for oil will grow robustly and supply will drop off quickly. If oil producers are protected by futures contracts that lock in a high price, they may not respond in the manner expected. In fact, if they are obligated to make debt payments, they may continue drilling even when it may not otherwise make financial sense to do so.

Likewise, consumers are also affected by prior commitments. If much of consumers’  income is tied up with condominium payments, auto payments, and payment of taxes, they may not have much ability to respond to lower oil prices. Instead of increasing discretionary spending, consumers may pay off some of their debt with their newfound income.

Conclusion

If the current economic system crashes and it becomes necessary to create a new one, the new system will have to deal with having an ever-smaller amount of goods and services available for a fairly long transition time. This is one chart I have shown in the past of how the growth in energy products, and thus growth in goods and services, might look.

Figure 4. Estimate of future energy production by author. Historical data based on BP adjusted to IEA groupings.

Figure 4. Estimate of future energy production by author. Historical data based on BP adjusted to IEA groupings.

Because of this, the new system will have to be very different from the current one. Most promises will need to be of short duration.  Transfers among people living in a particular area might still be facilitated by a financial system, but it would be hard to have long-term or long-distance contracts. As a result, the new economy will likely need to be much simpler than our current economy. It is doubtful it could include fossil fuels.

Many people ask why we can’t just cancel all debt, and start over again. To do so would probably mean canceling all bank accounts as well. Most of our current jobs would probably disappear. We would probably be without grid electricity and without oil for cars. It would be very difficult to start over from such a situation. We would truly have to start over from scratch.

I have not talked about a distinction between “borrowed funds” and “accumulated equity”. Such a distinction is important in terms of the rate of return investors expect, but it is not as important in a crash situation. Similarly, the difference between stocks, bonds, pension plans, and insurance contracts becomes less important as well. If there are real problems, anything that is not physical ends up in the general category of “paper wealth”.

We cannot count on paper wealth (or for that matter, any wealth) for the long term. Each year, the amount of goods and services the economy can produce is limited by how the economy is performing, given limits we are reaching. If the quantity of these goods and services starts falling rapidly, governments may fail in addition to our problems with debts defaulting. Those holding paper wealth can’t count on getting very much. Workers producing whatever goods and services are actually being produced will likely need to be paid first.

 

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
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506 Responses to The Problem of Debt as We Reach Oil Limits

  1. Regarding recent questions and debate here about Greece, Eurozone, EU, global debt etc. You might find quite educative the following articles and posts aiming closer to the very core of the problem..
    Long term perspective finite world issues aside these musings are important from the near-midterm perspective, because TPTB and their (new) games are going to stick around for at least significant portion of our lifes.


    http://www.zerohedge.com/news/2015-02-20/why-european-bondholders-refuse-sell-ecb
    Fri, 02/20/2015 – 22:10 | 5810877 NoDebt

    If you made commitments based on 4-5% returns assumptions you CAN NOT ACCEPT 1% yields. Even if the short term gain from selling your current bond porfolio to the ECB is significant.

    Please do not mistake this for some return to rational (significantly above zero) interest rates. THIS ISN’T THAT. This is contractual obligations feeling the strain of YEARS of central banks repressing interest rates. Not to mention that we’ve been in a depression since 2008.

    Pension funds, annuities and their ilk make benefits commitments built on interest rate assumptions. Commitments and assumptions were set years ago. Reality has come in well below those assumptions.

    This will never grab big headlines and few will understand it until pension funds start getting ‘Detroit-ed’. Not just in broke, corrupt, terminally-under-funded shit holes, but across large swaths of the “defined benefit” world, both private and governmental.

    This is how things come apart when long term promises can’t be met. This is when “but I was promised!” starts to meet the brick wall of reality.

    To MILLIONS of people this is actually a very big, very important deal. It’s a shame nobody will remember this article, nor my tiny spit of a comment on it by the time reality bites them in the ass.

    +

    If you’re depending on the past promises of others in todays world, yes, you are well and truly screwed.


    http://philosophyofmetrics.com/2015/02/18/development-goals-of-the-new-world-order/#comments
    beachdude2

    February 18, 2015 at 4:20 pm

    Deflation destroys debt which is clearly not the long term goal of the International Bankers, but it can be used as a tool to force the restructuring of debt.

    Pure fiat is a fascinating concept and a confidence based Ponzi scheme, IMO (paper currency backed up by paper bonds that promise to pay out with more paper). Many influential bloggers (e.g. Martin Armstrong, David Stockman, Jim Rickards, etc.) seem to think the elites have bungled this and we are headed for a sovereign bond bubble implosion because of their incompetence. JC Collins, on the other hand, provides an alternate view that confidence will be restored as part of a broader debt restructuring plan based on a new “asset backed” SDR currency regime.

    If you reflect back on various debt restructurings over the past 30 years, Naomi Klein’s seminal work “The Shock Doctrine: The Rise of Disaster Capitalism” is very instructive.

    Essentially, global bankers restructured the debt of various countries (e.g. Latin America, Asian Tigers, South Africa, Russia, Eastern Europe, etc.) by exchanging new paper bonds for “privatization” of any and all public assets. I view this technique as the new “Toll Booth” form of Feudalism by the “rent seeking” elites.

    So, where does the new SDR fit in? I see it essentially as a bait & switch to restore “confidence in a new and improved Fiat regime” that is partially backed by tangible assets and production based economies (i.e. Resources and commodities like Gold, Oil, Wheat, etc. along with country level GDP).

    If this is the end game, it would seem to me that the value of the new paper based SDR regime can best be maximized by driving down the value of tangible assets using Deflation as the mechanism. It would also seem to me that each countries resources and/or commodities now become a kind of “collateral” for the SDR restructuring thus privatizing the tangible assets at their lowest possible value.

    Scary shit when you think about it….

    • Also adding into the bowel some spice of Nicole’s recent (video) summary presentation about likely future scenarios:
      http://www.theautomaticearth.com/2015/02/sucking-beer-out-of-the-carpet-nicole-foss-at-the-great-debate-in-melbourne/

      People of Eastern Ukraine looking for scraps after the invasion force retreats.
      Bottom line, people used to civilized life and certain comfort level are suddendly hidding like rats in basements, understandably even after 3/4year they still can’t mentaly process the change before/now. RT Video: http://rt.com/news/234323-ukraine-troops-pullout-civilians/

      My conclusion from it all, the next 10-30yrs are absolutely unpredictable in the final outcome and possible solution path choosen/forced upon us, not mentioning how to select the correct or “optimal” way how to proceed, so don’t be too hard on yourself for likely failure, most people won’t make it as well in terms maintaining their current living arrangements, social niveau, wealth, ideas and believes.

    • richard says:

      This link seems to need a bit of work to download:
      http://www.golemxiv.co.uk
      See “The next Crisis – Part three – The world turned upside down” from sep 2014
      Summary : The end of democracy and sovereignty and its replacement by international treaties, corporate governance, and Fascism.
      Greece brings this into sharp focus by its attempt to assert the sovereign’s historic way of restoring solvency by debt renegotiation and ultimately, debt default.

    • Of course, if the economy isn’t growing by much, you can’t pay much interest. And if interest rates are very high, with as much debt is currently outstanding, everyone is broke. So higher interest rates don’t work.

      I would argue that actuaries quite a while ago should have figured out that the high rates they were forecasting wouldn’t work for very long in a finite world.

      • TPTB will rather #1 reset the system and start on clean table, be it debt jubilee or other forms how to dislock the system then #2 let unconditionally collapse their power/wealth and instruments (toys=war machine). By many accounts option #1 is in the late stage works, perhaps few months/years away from conclusion.

  2. Don Stewart says:

    Dear Gail and All
    I would like to try to tie a few things together.
    First, Ron Patterson’s blog has a story on, among other things, Jean Laherrere’s predictions in terms of conventional oil production. There are some interesting comments, and i particularly call your attention to the Lawrence Livermore chart which is a moderate scroll down. The chart shows the sources where we get industrial energy, and the sinks for the energy. A great deal of the energy disappears as waste heat.

    As a question of curiosity, I worked out, very roughly, the relationship of the dietary calories required by Americans to the quadrillions of BTUs that the US consume on the Lawrence Livermore chart. It is 1 times E to the minus 9. Minuscule, in other words. (You shouldn’t trust my math).

    A number of the commenters on Ron’s blog pursue thermodynamic solutions to our problems, some arguing that moving toward solar PV will be essential.

    Second, this got me to thinking about my favorite solution, which is using the remaining fossil fuels to enable humans to get maximum benefit from natural energy such as solar irradiation and gravity and by using the built environment to do things like moderate the environment (e.g., passive solar designs, earth for thermal moderation, the sorts of earth works favored by biological farmers, etc.)

    Third, how might one go about persuading anyone to adopt the sort of ‘green’ solutions implied in the preceding paragraph. And, lo and behold, I happened on:
    http://scienceblogs.com/thepumphandle/2015/02/06/study-self-affirmation-targets-the-brain-in-way-that-makes-us-receptive-to-health-messaging/

    In a nutshell, everyone knows that smoking is not good for you. But public health messages are not really as effective as a rationalist might think. The answer seems to be to
    *find out what the values of the target person are
    *prime those values with a reminder
    *deliver the public health message while the target is still primed.

    Is it possible to frame a sort of ecological and economical ‘public health’ message that actually changes public behavior, one person at a time?

    Perhaps….Don Stewart

    • I think the best approach is to drag a politican (or entire delegation) on site of actual (100acres plus) functioning biologic farm be it in the US/EU/Australi-NZ, give him on the spot “101” basic lecture including current surplus/output production, so they can easily estimate what could be done on large scale by giving/allowing acreage to people, i.e. land reform. That would give them some ideas and how face deep state actors and other obstacles for swift implementation.

      Obviously this will never happen under current circumstances.
      Perhaps it could proceed only at some future distant point when depletion hits very hard and real (frivolous) demand destruction would be exhausted already, let say that’s still 5-25yrs away, depending on country/region.

      I’d give it a small chance anyway, as described in my previous comments.

      I think it’s not hard to smell the powder afterall, the probability that upgraded caveman aka hunter gatherer apeman goes in just in ~10K years from firewood, stone and basic metals into “hitech” terraforming act of the entire planet and its ecosystem somehow in natural way of progress/evolution is beyond ridiculous. That’s a topic for different perhaps more abstract discussion though, but we – domesticated people are either product of some genetic or other external reprogramming project to terraform the planet relatively quickly in the timeline of some “macro species” of the universe for reasons to me unknown(able) or some variation of similar scheme (plaything ants colony) etc. That’s very rational thought, what brought me up to this point was previously held naive idea that perhaps “nature” just wanted to push the 6th extinction wave and used the homoape as the fossil fuel eneregy storage releasing agent, but that’s not fitting rational scrutiny anymore..

    • Besides eating, we have to cook our food. We also have to keep warm, if we live in a cold climate. It might be helpful if we could heat our water to sterilize it as well. I expect we would have to find a way to get sufficient fresh water for folks as well, in many parts of the world, using energy.

      The big energy waste that we have now is all of the heat that is lost when we make electricity from various sources. Russia, Sweden, and perhaps other countries have pursued co-generation, but we have not. One comment I heard regarding why we ignore this lost heat energy is because it would create a natural monopoly

      • Don Stewart says:

        Gail
        The calculation of how much industrial energy we are using is mostly to jolt oneself out of the rut of thinking that everything has to go on as it is now. It is like zero based budgeting. When David Kennedy shows that the current food system is not sustainable, he then begins an exercise in zero based budgeting…building a diet from needs, rather than wants or whims or custom.

        Humans mostly tend to want to start from what they have, and then do more of it. I saw a video from the village in Ukraine which was recently captured by the Eastern Ukrainian forces. The residents emerge out of cellars and places they have been hiding. One lady says that she hopes what has happened to them happens to Poroshenko’s family. I am sure a few people thought about their luck in having survived, but most of what i heard was just complaining about what the Kiev government had taken from them.

        In a fast collapse, we won’t have a lot of time to sit around and complain. There won’t be any ‘humanitarian aid’ coming from Russia. We will need to be able to do a zero based budgeting exercise quite rapidly, without sitting around complaining about the evil banks, the idiotic politicians, or our neighbor.

        It seems to me that the finding on reinforcing an individual’s values is important. I need to meet people where they are, not try to convince them that my values should be their values….or pretend that our group has some distinctive values which make us exceptional. There are lots of reasons why, in a collapse, it is important to find seeds and grow food. The motivations to do it will come from the many different values that people have. I think the same is true of a Transition group or a prepper group or a community garden group.

        For these latter kinds of groups, it is worth noting some experiments with rats. Rats can be offered two options: food for free or food for work. The rats will choose a mix of food for free and food for work. Why would a rat choose to work when they don’t have to? One reasons is probably that we are rewarded with dopamine as we get nearer a goal we are working toward. A rat that doesn’t work never has a goal, and so never gets any dopamine. There are profound implications in that finding.

        Don Stewart

        • Don Stewart says:

          Dear Gail and All
          Here is The Automatic Earth saying what I am trying to say about zero based budgeting in terms of collapse…Don Stewart

          People need to think about how much energy use and how much complexity is involved in what they would like to see as their way forward. If there’s too much of either, let alone of both, that way is simply not viable, and it’s back to the drawing board.

          I’m not going to transcribe too much of her talk, it’s well worth watching the few minutes she talks. Still, here’s one quote from Nicole:

          Our society will be forced to simplify. The paradox with low-energy-profit-ratio energy sources is they cannot sustain the level of complexity necessary to produce them. [..] If your solution rests on complexity, it’s not going to work. We’re going to contract and simplify, like it or not.

        • edpell says:

          Don,, the point about the rats working some explains why I enjoy work some. Especially and intense push to a goal.

        • You are hitting at the same reason I posted the video from E. Ukraine, although it’s a perifery, it is not Balkans, NAfrika or Middle East, it was/still partially belongs to civilization circle, which deals with hitec in nuclear civil/military, space programme, jets, biochemistry etc.

          That’s what is shocking about parts of Ukraine falling into 3rd world status in few months time, and they can still fall back on larger Russsia for humanitarian aid in the long term. Imagine situation you don’t have this option anymore, scary.. As if we can see the process of vector pushing from perifery -> core destruction, so next in line “must be” some EU country, NAmerika etc.

          I posted from RT, now same topic from UK channel:
          http://blogs.channel4.com/alex-thomsons-view/life-debaltseve-digging-pasta-debris/9067

        • edpell says:

          Don, this explains why the super rich keep going to the office every day. It is not more money they crave it is dopamine.

          • Don Stewart says:

            Edpell
            I recently read an interview with Boone Pickens. He said that he and his partners meet every afternoon to figure out how much money they made that day.

            Don Stewart

      • Yes, we can prepare a very long list contributing to future demand drop, co-generation, personal car-share, bicycles, public transport light-rail/trolleybus, trains, solar hot water and space heating, low watt computers/personal electronics (although power consumption increases at the centralized cluster/server side), megafarmed insect proteins, homescale permaculture proteins/carbs/oils, fewer workhours/days at office/industry, less healthcare and frivolous consumption support, .. on and on..

        So the end of current energy/debt plateau could be not only postponned a bit but also make at least for several decades the following descent in “organized” fashion.

        Therefore now here comes the clincher, by rational estimates the current debt (and overal political system) in theory should not survive such phase shift onto permanently new lower energy flow base. The problem is that we live in real humans world, so in my book it is quite possible to imagine a society doing the “good transitional things”, while still being subjected under the yoke of opressive government/owner class power structure. Hence my often repeated reluctance to call a full crash in the short term. Because what we are aparently getting is western societies increasingly adapting the open authoritarian rule of government as seen in Russia/China.

      • richard says:

        Co-generation (combined heat and power)
        Historically, coal burning power stations were built in the middle of cities (eg Battersea, London) and the surplus heat (and perhaps some steam) pumped to local industry and housing. That changed in favour of economies of scale and less pollution.
        Recently I looked at installing CHP in my home, but with efficiencies of the order of 55% for nearby gas fired CCGT versus ~<50% Electricity and overall efficiency of maybe 70%, looking at a return on my investment, it just wasn't worth the effort, and the putative equipment is still not on the market three years later.
        I have also some experience of industrial scale CHP, and maintenance costs are a killer.

        • The devil is always in the details, like maintenance costs.

          I noticed in China that a lot of power plants are in the middle of cities. I am sure it is more convenient that way–employees can walk to work, and transmission lines don’t need to be as long. Can even use cogeneration, if they like. But it contributes to the pollution problems.

          • richard says:

            I read a while back that China has numerous inefficient coal fired district heating schemes, especially in the north. They are steadily replacing the older coal-fired electricity generation even though that means job losses both for the power stations and the local coal mines labour. Modern gas-fired plant will help, but particulates from diesel fuelled transport are the problem they need to solve. It’s hard to know what will happen if and when the next financial crisis bites.

  3. MG says:

    The process of colonization of the Eearth by the human species consists of creating new man-made ecosystems based on the available energy and resources. These new man-made ecosystems are subsequently filled with the new people. The real reason for exponential growth in the resource depletion is the fact that we not only create new man-made ecosystems, but also need to operate and maintain the man-made ecosystems that were built previously.

    The fossil fuel era allowed the mankind to add new man-made ecosystems in a very fast pace. As we reach the limits, the Seneca cliff is inevitable, as these man-made ecosystems will crash more or less simultaneously. Not due to the lack of resources, but due to the lack of energy, as the energy allows us not just mining new ores, but also rebuilding the existing man-mad ecosystems using reprocessed resources.

    The rising debt allowed us not only building new man-made ecosystems, but also rebuilding the existing ones. The mortgage crisis that peaked in 2008 was not mainly about the too hight debt regarding the houses itself. As we started to use more expensive energy, it was still quite easy to build new houses using new long-term debt.

    The crucial is the fact that THE ENERGY FOR OPERATING these MAN-MADE ECOSYSTEMS MUST BE CHEAP. That is why the houses were built faster than it was possible to fill them with new people: we started to experience the lack of cheap energy that would allow the people to use these houses, i.e. to be able simultaneously repay the debt and secure everyday operation costs of their lives in such new dwellings and environments. While the mortgage, i. e. a one-time long term debt, can allow one-time use of costly energy for building a life-long dwelling, the debt for everyday expenses can not rise constatly with higher energy costs.

    That is why we come to the point, when the prices of oil, and of energy in general, crash. We also do not need new resources for new man-made ecosystems, as it proved that the system reaches its limits, the building of new houses with high energy costs is uneconomical. So the prices of commodities go down, too.

    What we experience now are the limits of the expansion of the mankind: we are not able to build and operate new man-made ecosystems and fill them with new people, as we lack the cheap energy for operating these man-made ecosystems. The rising debt brought us new amounts of unconventional oil, but we do not need this costly oil, as we do not need building new man-made ecosystems using long-term debt.

    What we really need is the cheap oil for the operation of already existing man-made ecosystems.

  4. Don Stewart says:

    Dear Gail and All
    Recommended viewing:
    http://www.theautomaticearth.com/2015/02/sucking-beer-out-of-the-carpet-nicole-foss-at-the-great-debate-in-melbourne/

    This consists of 6 eminent authorities speaking for 10 minutes each on questions around climate change, financial and resource collapse, what the appropriate response is, etc. I think you will find that the six speakers cover a wide variety of viewpoints, many of which have been represented here.

    Don Stewart

    • Yep, that’s what I linked previously, mostly about Nicole Foss segment. Also read it the discussion bellow the video from the conference, there is a link explaining why Nicole urges people not to buy ANY property at the moment, expecting brutal asset price destruction in the near term.

      Not explicitly stated there she is perhaps also thinking about re-populating/reconstructing the lands, either by some sort of non violant squatting, land reform when the system breaks down etc. Obviously your milage may vary, there could be good deals today.

      Nowadays with the agriculture sector sanctions EURussia in place we can see rather strong deflationary push inside Europe, dairy is being produced quite bellow production costs, some sectors of fruits as well etc., and it all floats on both local government and EU subsidies for farmers, which can be as high as 30-40% in Austria/Germany etc. Farmland prices in EU are beyond bubble high from this multidecade subsidy process (incl. increasing rationalization through technology) anyway, young people not interested to replace the current aging generation of farmers. Now add the factor of EU policy “set aside” which mandates setting large %% of land for not cultivation in order to support price levels. That all spells acreage price crash in the future of massive proportion, albeit temporary see bellow.

      Another factor, perhaps as counter current might be the proposed hispeed railway link from China to Russia and extended via Turkey to the EU, in that fashion you can export even perishable food segments to China easily. That would be a rehash of the producing colony-consuming center of the Roman Empire. Not sure how realistic it is, but worth mentioning.. If this is the case, land pricing will eventually go even more bizzarly high, so watch the positioning of key players, might be a hint which scenario goes eventually forwards.

      • MG says:

        ” If this is the case, land pricing will eventually go even more bizzarly high, so watch the positioning of key players, might be a hint which scenario goes eventually forwards.”

        This is not possible, when we lose low priced oil. First the production becomes uneconomical (which is now hidden using subsidies), then also transportation. All food will be grown only on a very local basis. The productivity will go drastically down, which means that a lot of agricultural land will be simply abandoned.

        • ?Again it was just a sub scenario for mid term future (say till 2045) put forward, I think you did not address the arguments very much.

          So, I’ll repeat the score, China has money/reserves to burn (while the current IMFs USD regime lasts), related industrial capacity ready, desire to move up the living standard quality ladder incl. food variety etc. Therefore they can for such strategic plan easily drop few hundred billions on such “Silkway v2.0” railway project on route form EU via Turkey and Russia to China, which they already announced anyway. Given the short time distance (as opossed to very slow container ship or expensive air route) they can load up foods-produce along the rail way stops, both in Russia and Europe. As mentioned before, Europe is in demographic decline and large %% of land is on purpose not cultivated today, thus some %% of Europeans can go back into agriculture and export some surplus to China. So, should this go forward, price of land could at the minimum stabilize (after previous slump if there was any) or even increase as insiders will frontload the process.

          • Sorry didn’t stress the fact we were with Don mainly discussing “biologic” agriculture, i.e. method which increases yields on marginal land as opposed to “chemical – industrial” which goes bust, current model of agriculture you probably had in mind. So it was probably apples/oranges type of misunderstanding in your reply.

            • MG says:

              I have written here about a project of big greenhouses built in my area when the price of oil was above USD 100. This project was based on the fact that they could grow cheaper cherry tomatoes for local market locally when the transportation costs went up.

              I am affraid that now, with lower oil prices, this project has got a problem to compete with the imports. What will happen when there is lower and lower purchasing power due to the deflation? Will anybody buy cherry tomatoes grown locally or imported?

              When the governments fall, there will be no one to provide subsidies for food growing. The system will be full of holes that will make large scale food production and transportation impossible. That is the nature of the deflating, imploding economy: the lack of energy for food production and interconnecting the provider with the supplier.

              Will it be more economical to inject energy into food production in the distant regions rather than intensify the local production as much as possible? There must be a lot of energy subsidies to keep the system operating in both cases, not just money.

            • Don Stewart says:

              Dear MG
              From David Kennedy’s Eat Your Greens:
              ‘the average lot size is 15,000 square feet, and this is 12,000 square feet larger than the average house size. This allows plenty of room for a productive kitchen garden. The current average home vegetable garden takes up 600 square feet, or just four percent of the average lot. Should we decide to get serious about local food, we could potentially double the size of our kitchen gardens and still leave nine-tenths of our housing lots for other uses.’

              I think it is fair to say that, in the US overall, we have plenty of land to grow food. If we grow the perishables close to home, and use farms to grow dry staple crops which are easily transported, then the basics of land availability and transportation are not insuperable obstacles. There are many other problems which we will either have to solve or else starve: use corn and corn land for food rather than fuel; reduce the population density of very dense cities; rebuild gardening skills in the population; deal with climate change, etc.

              Let me elaborate a little on the climate change issue. In the eastern third of the US, which is the part that gets plenty of rain and thus is most amenable to gardening, we have had a succession of chaotic spring weather. This year, we have the Siberian Express which has caused us in North Carolina to shatter old cold temperature records by 8 degrees F. Most new records are a degree or two warmer or colder. So you can see that things are now very different. The local gardening scene is heavily dependent on a few farmers with unheated greenhouses planting ‘starts’ which they sell at farmer’s markets. The home gardeners buy the starts and transplant them into their gardens. (There are other ways to do it, but I have just described a very popular way.)

              But, this year, the unheated greenhouses are being asked to cope with temperatures in the single digits. And for weeks in a row, so that it is not just a one-night stand with the warm soil keeping the temperature in the greenhouse much warmer than the air…the soil is really cold. Recently, the soil temperatures in February have been less than the soil temperatures in January.

              In addition, any blooming perennial, such as a fruit tree, and their pollinators are shocked by their inability to cope with the chaos. 3 years ago I had a good peach crop, 2 years ago I got not a single peach, last year I got a good peach crop, with frosts both before and after the blooming period. Last year we saw very few butterflies.

              In short, the natural cycles which we had come to depend on have been disrupted.

              It is always possible to offset natural cycles by building expensive infrastructure. One can build gigantic heated greenhouses and grow tomatoes in Ontario in January and ship them to North Carolina, using natural gas to heat the greenhouses. The tomatoes taste like cardboard, but it is technically possible to do it. California can truck 75 percent of all the bees in the US to California to pollinate the almonds. You can easily imagine the flaws in the ‘just build fossil fueled infrastructure’ strategy, so I won’t belabor the point.

              What we have, in 2015, I think is this:
              *The climate has become unstable, challenging plants and their small critter partners.
              *The challenges to plants and small critters also pose a challenge to small farmers and gardeners.
              *It’s easy to visualize ‘farming in skyscrapers’ and ‘giant heated greenhouses’, but the practicality of such schemes is usually an illusion.
              * The best solution I can think of is home gardens, very localized trade among gardeners and others, and the rebuilding of our dry staple system. And, as I indicate, climate change makes that harder. Cooking is one of Gail’s hot buttons, and for that I think that PV panels operating something like a rice cooker would be the ideal. If we can’t make the PV panel solution work, then we will have to fall back on passive solar cookers.
              * I visited a farm recently which had been an off-grid farm with both solar hot water and PV panels with batteries. The old owners sold it to a couple who had been in the horticulture business for several decades. The horticulture couple have tackled all the farming and gardening tasks with enthusiasm, but they just didn’t want to mess around with the solar electricity. So they connected it to the grid. The moral, I think, is that there are limits to what any family can do. Most families will either be good farmers or good electricians, but not both. Therefore, we will have to painfully construct a local economy which involves specialization.

              Don Stewart

            • I’m afraid current model of government can’t fall at least till current legacy infrustructure has not completely rotten away, coal mines, gas pipelines, hydrodams are working etc. Hyperdeflation, widespread poverty, insecurity, you name it, but for the next couple of decades there will be crushing fist governments and rent seeking parasites (aka elites) around. That’s the way world is, sadly.

            • “I’m afraid current model of government can’t fall at least till current legacy infrustructure has not completely rotten away”

              Yemen and Iraq are contrary to your claim; Iraq due to war, and Yemen due to passing peak oil production. As soon as there is a decline in energy and/or money, it becomes harder and harder for governments to suppress regional uprisings. I guess it really matters the particular country and all of its specific details as to how long a strong central government can persist under declining energy.

            • Don Stewart says:

              Dear Matthew Krajcik
              I took a look at Al Jazeera yesterday. Article describing the conflict between Baghdad and the Kurds over the split of the oil money. The Kurds have resumed talks with Turkey about getting the oil to market through that country. Scottish Independence was, to some extent, about oil money. Libya seems to be about oil money. Even the Texas Secession movement in the US was to some extent about the oil money.

              Don Stewart

            • edpell says:

              Worldof, I agree. Until it is 90% gone the parasite of government of rich will continue their roles.

          • Don Stewart says:

            Dear world of hanuman
            I don’t know how I missed your reference to the Australian debate. Sorry.
            Don Stewart

        • “All food will be grown only on a very local basis. The productivity will go drastically down, which means that a lot of agricultural land will be simply abandoned.”

          Do you think there is enough green space in most major cities to grow all their own food locally?

          I think it is more likely that lots of people will have to move from the cities to the farm land, and work that land manually, than it is that the farms will be abandoned.

          • MG says:

            Dear Matthew Krajcik,

            I think that the cities will be hollowed out like Detroit, i. e. people will move from the centers to the outskirts, where more land for cultivation is available. The basic problem of the lowering productivity of the agriculture due to the lack of energy will bring the population down everywhere. There will be a surplus of the land with low productivity that we will not be able to make productive again. Much of our todays agricultural land was created based on the inputs from the cheap fossil fuel energy.

            • richard says:

              “I think that the cities will be hollowed out like Detroit, i. e. people will move from the centers to the outskirts, where more land for cultivation is available. ”
              My expectation is that the centre of the cities will remain, if the reasons the cities formed in the first place are still there. Only the cores of these cities will have electricity and water 24/7 and perhaps 365. I’m hoping to be long gone by the time that happens.

  5. Don Stewart says:

    Dear MG
    A little more on climate change. 3 years ago, we had a locally produced one day conference on climate change and farming. About 4 years ago, James Hansen came to the University of North Carolina on a very frigid night and told us that the world was going to get warmer. He rejected the notion that ‘climate change’ was a useful description…things were just going to get warmer.

    I had happened to read an article by a New Jersey high school chemistry teacher named Dan Allen. Allen had examined the ice core record, and had observed that the climate for the last 10,000 years has been stable, but before that it was quite volatile. Allen thought that what would probably happen as we continued to pump CO2 into the air was a return to the volatility. Allen has a farm in New Jersey, so he understood the implications of such a change.

    So I am aware that the ‘steadily warming planet’ story may not be a very good one. I go to the conference, and a lot of the farmers are thinking that climate change is going to be good for us. The USDA had just moved our area from Zone 7B to 7A. Many people thought it was a near term certainty that we would be in Zone 8. Zone 8 would permit use to grow quite a few plants that don’t do well in Zone 7. So…what’s to worry about?

    Well, now we are several years down the road and we see that climate change is producing very volatile springs. In effect, if a farmer waits until warm weather is assured, he will have a very short interval before really hot summer weather gets here. The long spring growing season, aided by starts grown in unheated greenhouses, will no longer be dependable. From a financial standpoint, small farmers can make a lot more money if they are prepared to sell something during the first warm days of spring…not just getting outside to put seeds in the ground.

    So far, our falls are still long and dependable. But we may have lost spring. If any of the local farmers can remember the pleasant thoughts about Zone 8 from 3 years ago, how do you think they feel now?

    Don Stewart

    • MG says:

      Dear Don Stuart,

      I am reacting also to your comment above, regarding the home vegetable gardens:

      There was quite a lot of people who still grew food locally in Slovakia in the 80s. After the fall of the Soviet Union, the economy went down. Do you think that people started to grow more food locally? No. The price of food went up, but the amount of locally produced food went down. Instead, the food started to be imported from the countries with higher food production subsidies.

      The problem is that the agricultural economy before the fossil fuels era was very poor. Today, the people prefer to work abroad and buy imported subsidized food at home. This way it is more economical and their standard of living is higher.

      When the real collapse comes, there will be no fertilizers, no machines available and no imported food. At first the collapse of the food imports must arrive to force the people restart home produced food, as this would mean much lower standard of living, namely the poverty of the 18th century and before.

      • MG says:

        Dear Don Stewart, excuse me for the spelling mistake, the Slovak language has almost idnetical spelling as pronunciation, so I am naturally inclined to make such mistakes like “Stuart”.

        • Don Stewart says:

          Dear MG
          First, my wife is of Slovak descent, as is my brother in law. So all is forgiven.

          Second, have you looked at Dmitry Orlov’s ‘Unspell’ project, for making a written English which looks like the spoken American English?

          Don Stewart

          • MG says:

            Dear Don Stewart,

            that is interesting that you have some close relatives of Slovak origin. My great-grandfather died and is burried in the USA. They were those people who left the Central Europe for working in the coal mines of Pennsylvania, Milwaukee area etc. in the end of the 19th and the beginning of the 20th century.

            I had a look at the project of Unspell. The Russian language has the same very close relationship between spoken and written language as Slovak, so the inspiraton of Dmitry Orlov is quite clear.

            • Don Stewart says:

              Dear MG
              My wife’s mother was born on a farm near the coal-mning area in Pennsylvania. After the initial migration to the coal mines, as the coal mines declined, the people tended to move to Jersey City to work in the factories. My wife’s mother left the farm, which couldn’t support all the children, and moved to the Pennsylvania Slovak colony in Jersey City. There, she met my wife’s father, whose mother had come directly from Slovakia around the turn of the 20th century. The mother had brought several children with her, and married a widower with several children. Then they had more children together. My wife was born and lived all her life in this Slovak enclave, until she met and married this foreigner (much to the dismay of most of the Slovaks).

              My brother in law’s family came to central Texas many generations ago, to farm. As the high plains in western Texas opened for agriculture after WWI, they moved to irrigated farms there. Those farms are now failing as the irrigation water dries up. There is a Slovak colony (not very large) in Los Angeles now, some of whom came from western Texas.

              My wife and daughter were in Slovakia as tourists a couple of years ago. My wife has the cheekbones, and people would speak to her in Slovak on the street. Sadly, although she spoke Slovak as a child, she can’t remember it now…except for a few bad words.

              My wife blames me for the dilution of the pure gene pool.

              Don Stewart

            • MG says:

              From the population dynamics aspect, it is interesting for me that it was Wisconsin, that started to ban discrimination for sexual orientation in the USA:

              http://www.mkelgbthist.org/

              Maybe we can consider this as the sign of the maturity of the population, when such topics start to be taken into consideration.

      • Don Stewart says:

        Dear MG
        I remember reading at the time of the collapse of the Soviet Union how much Poland would be able to get in agricultural subsidies from the EU.

        Now, according to what I read yesterday, Russia (which has placed restrictions on EU agricultural imports, is talking with Argentina about a fighter planes for food trade. Meanwhile, the EU is trying to think of ways to cut down their surplus of agricultural products and the cost of the subsidies.

        Argentina wants the fighter planes to restart the Falklands War from the 1980s.

        If any of the above makes any practical sense, would you please explain it to me.

        Don Stewart
        PS I did see a funny movie from Argentina, about 10 years ago. It was titled F*ckland…about a virile man from Argentina who travels to the Falklands and finds that the women are all sex starved due to the advanced degenerative state of English males. He has fun with the locals and then goes back to Argentina. I’m just not sure that sex starved women in the Falklands are worth starting a war for.

        • MG says:

          Lowering the food production subsidies will bring the food production in less fertile regions further down. And the food prices in general must go up. Lowering the food production quotas is the solution for too high food production.

        • Dear Don, as described above, the subsidies in Europe are twofold. CAP, common agri policy by the EU, and direct state support via local gov. So for instance, France and Austria gets (with sky high acreage price) tons of money from both streams, while the new member states from CEE get far less from CAP and must ponny up funds on their own, I gather that’s the case with Poland, however I think there are even some cretineous examples like the Czech rep. and couple of others who are deficient on both accounts on their own volition to enjoy their colony status to the fullest potential.

  6. Don Stewart says:

    Dear Gail and All
    Some recent posts here have questioned, ‘What is this Collapse we are talking about?’

    I’ll try to give a few hints about things to think about.

    John Michael Greer likes to talk about the rise and fall of military empires: the Persians, the Romans, the British, etc. I would like to tell a short story which may put military empires in some perspective.

    Yesterday my wife and I went to a concert at Duke. One of the pieces performed was written by Mieczyslaw Weinberg, AKA Moisei Samulilovich Vainberg, born in Warsaw, 1919, died in Moscow in 1994. Warsaw had just become part of the new country of Poland, which was formed from the collapse of the Russian, German, and Austrian empires in WWI. His father was a musician in the Jewish Theater, our hero was a child piano prodigy, and he was active in the Jewish music scene in Warsaw from an early age. When the Germans invaded Warsaw, our hero escaped to Minsk in the Soviet Union. By 1943 he was in Moscow, while the battle between the invading Germans and the defending Soviets was still raging. He became friendly with Dmitri Shostakovich, and was soon writing music for everybody who was anybody in Soviet music. In 1953, Stalin ordered him arrested. Shostakovitch intervened with Beria, the head of the KGB on his behalf. Stalin soon died, and not long after that Beria was killed. Our hero continued to write music and perform. The Soviet Union disintegrated, and then he died at a ripe old age.

    How would you describe our hero’s relationship to the military empires? And what about the Jewish community, which was numerous in central Europe before the Holocaust? I don’t know if he ever made much money, but he was widely admired and his music was performed. He lives on in the performance yesterday at Duke.

    This is not to claim that the wars and collapses and pogroms had no effect on him, and they certainly had an effect on those who died. I use this example merely to make the point that the world can be falling apart around someone, who may nevertheless find a way to live a rewarding life in the midst of history book chaos.

    The second point I would like to recommend for your consideration is the story of this farmer in Tennessee coping with the Siberian Express of the past couple of weeks:

    http://www.resilience.org/stories/2015-02-23/the-master-comes-home

    The threat to modern conveniences prompts the farmer to reflect back on his childhood home, when those conveniences were mostly absent. Would a return to the simpler ways of his childhood constitute a collapse?

    The third point of reference is Nate Hagens’ recent talk in Vancouver, BC:

    It’s a very good talk, and I recommend all of it. But for this particular point I call your attention to the section between 36 minutes and 44 minutes. Nate’s conclusion is that humans:
    Turn Energy and Resources into Money
    Money into Feelings Plus Waste

    Our real currency is neurotransmitters and hormones.

    If there is hope for humanity, it must lie in some grand awakening in terms of controlling our neurotransmitters and hormones with much less waste, which implies much reduced consumption of energy and resources.

    If there is no hope for humanity, then we have to look at the example set by Weinberg (and many others) who have managed to survive and thrive in the midst of history book chaos.

    At the recent debate in Australia, a great majority of the activists in attendance voted to try to keep our high consumption society together…rejecting both David Holmgren’s plea to ‘collapse now and avoid the rush’ and Nicole Foss’ bald claim that economic collapse is upon us, no matter what we do.

    I hope this frames the issues in a helpful way….Don Stewart

    • Stefeun says:

      Bonjour Don,
      Nate Hagens’ conference seems to resemble quite a lot to that one RobM posted in 1st page of comments here (Feb.12), from the few minutes I’ve seen of yours. Worth watching entirely, anyway.

      I take advantage that you chose to quote “Our real currency is hormones and neurotransmitters” to share some more information about neuroplasticity:

      – First, looks like Norman Doidge’s 2008 book “The Brain That Changes Itself” is available for free on the web: http://www.cesc.co.in/cesc/e-prognya/cms/wp-content/uploads/2012/05/28945157-the-brain-that-changes-itself.pdf

      – Second, I found this blog “The Best Brain Possible” by a Debbie Hampton who introduces herself as follows: “I’m Debbie Hampton. After decades of depression, a serious suicide attempt and resulting brain injury, I not only survived, but went on to thrive by discovering the super power we all have to build a better brain and joyful life. If I can do it, you can too. Let me inspire and inform you to do the same. No brain injury required.”
      I’ve read only a few of her posts, she seems to have really interesting insights about physical exercise, visualization, competitive plasticity (“use it or lose it”), etc . About energy, she writes:
      “The invention of cooking food gave humans the means to power their growing brains because our guts could more easily absorb energy from cooked food.
      Our brains also adapted by learning to become incredibly energy efficient. At any one time, only a small proportion of brain cells are signaling, a process known as “sparse coding”, allowing the brain to use the least amount of energy while transferring the most information. The need to conserve energy resources is the reason that most brain processes happen below conscious awareness and that multi-tasking just doesn’t work. There’s not enough energy available to the brain to focus on more than one thing at a time. (…)”
      More here: http://www.thebestbrainpossible.com

    • Stefeun says:

      Dear Don and others interested in Neuro-plasticity,

      while trying to know more about “Dopamine is the real currency” (to paraphrase Nate Hagens, Norman Doidge, etc..), I found this:

      – Doidge’s 2008 book “The Brain that Changes Itself” is available for free download at http://www.cesc.co.in/cesc/e-prognya/cms/wp-content/uploads/2012/05/28945157-the-brain-that-changes-itself.pdf (247 pdf pages)
      Doidge describes examples of serious troubles that could be fixed with -rather simple- techniques helping the brain to use non-dedicated areas and circuits to acheive purposes that normally used damaged neurons. He starts to draw conclusions that I think are developed further in his latest book. Interesting reading (I just started).

      – a blog called “The Best Brain Possible”: http://www.thebestbrainpossible.com
      The author introduces herself like this: “I’m Debbie Hampton. After decades of depression, a serious suicide attempt and resulting brain injury, I not only survived, but went on to thrive by discovering the super power we all have to build a better brain and joyful life. If I can do it, you can too. Let me inspire and inform you to do the same. No brain injury required.”
      Among many interesting insights (and links) I’ll quote only what she’s saying about energy: “The invention of cooking food gave humans the means to power their growing brains because our guts could more easily absorb energy from cooked food.
      Our brains also adapted by learning to become incredibly energy efficient. At any one time, only a small proportion of brain cells are signaling, a process known as “sparse coding”, allowing the brain to use the least amount of energy while transferring the most information. The need to conserve energy resources is the reason that most brain processes happen below conscious awareness and that multi-tasking just doesn’t work. There’s not enough energy available to the brain to focus on more than one thing at a time.(…)”

      • Don Stewart says:

        Dear Stefeun
        In The Neuroscience of Change, Kelly McGonigal first reminds her audiences that the Wisdom traditions have claimed for thousands of years that the ‘natural’ state of the mind is like a vast and expansive, clear-blue sky. Kelly then invites the audience to spend one minute enjoying the ‘vast and expansive, clear-blue sky’ by thinking about nothing at all.

        After what seems like a long time, she comes back and asks whether the suggestion worked. The answer, for most people, is ‘No’. When we are not focused on something, our brains resort to a ‘default state’ which is rather chaotic. What organizes our mind is some specific action we are trying to execute or problem we are trying to solve or something like falling in love which is managed by our hormones. The psychologist Mihaly Csikszentmihalyi popularized the benefits of focus in his book Flow, a couple of decades ago. The idea is to be doing something which is at the edge of our abilities…not so hard that we are just frustrated, but not so easy that we can let our minds wander. It seems to me that the ancients who developed the practice of meditation by focusing on the breath were doing something similar.

        Kelly never gets back to the question of whether the Wisdom traditions were wrong. My take on it is that it takes a lot of practice in focusing the mind in order to get to any ‘vast and expansive, clear-blue sky’ state.

        I think that Systems Science, as laid out by Mobus and Kalton, is a way of focusing the mind on complex issues. A television ad focuses our mind intently on the things that Nate Hagens talks about as ‘speaking much louder than Climate Change’. If we want to focus our mind on a subject as complicated as ‘human survival in the next hundred years’, then we need a scaffolding such as that provided by Systems Science.

        Don Stewart

  7. Quitollis says:

    More woes for the EU.

    The leftist eurosceptic Le Pen is now up to 30% in polls for next months nationwide local elections. The euro currency block would surely be over were she to win the presidency in 2017 and withdraw France.

    http://www.independent.co.uk/news/world/europe/frances-national-front-marine-le-pens-farright-party-is-leading-in-the-polls-ahead-of-next-months-local-elections-10064665.html

    And the centre right eurosceptic Alternative for Deutschland party has taken its first seats in western Germany following a string of success in the east.

    http://www.ft.com/cms/s/0/9ea3d780-b5bf-11e4-a577-00144feab7de.html

    http://rt.com/op-edge/232775-germany-elections-alternative-party/

  8. Don Stewart says:

    Dear Gail and All
    Recommended reading:
    http://peakoil.com/consumption/is-oil-becoming-obsolete

    Elon Musk plans to introduce a new battery for the home. Letting PV panels be more convenient for the average homeowner, as well as saving money.

    Don Stewart

    • “Elon Musk plans to introduce a new battery for the home. Letting PV panels be more convenient for the average homeowner, as well as saving money.”

      We’ll see in 25 years how many times the batteries had to be replaced, how recyclable they are, and what the net EROEI whole life cycle for the system is. Unfortunately, we cannot wait 25 years to find out the answer, and iterate from there.

      The key to the money saving is government subsidies. Whether the system really is economically viable, we again won’t know until the system has gone through its whole life and been taken down and recycled. Same with the greenhouse gas emissions.

    • MG says:

      The trick is in the fact that you alone can have your electricity from the battery, but if others do not have the electricity, our current civilization is finished. Furthemore, it is the cheap oil that actually interconnects all the items of the system. Not electricity or 3D printers. You can not print the plastic material that a 3D printer uses for “printing” or a 3D printer itself.

      Small scale low energy solutions will not save the current civilization. Anyway, all that needs subsidies is not economical, as it takes energy from other parts of the system. The same way as the costly oil takes energy from other parts of the system.

      The surface still may look o.k., but the cracks of the imploding reality under its rosy make-up are widening…

      • “Small scale low energy solutions will not save the current civilization. ”

        I don’t think that’s the goal. The goal is either to make changes to alter the system, or to survive the collapse.

        “You can not print the plastic material that a 3D printer uses for “printing” or a 3D printer itself.”

        You can make plastics from starches. We’ll see, the more time BAU lasts, the more innovations we can develop. There are 3D Printers that can print most of their own parts. We’re pretty close to being able to print memory and processing on paper with special ink. It’s a race against time, between the inevitable collapse, and getting self-replicating machines.

        • John Doyle says:

          Yes, but when all the politicians and the mainstream media and the general public are lost in dreamland there will never likely be enough time. If we lose the grid, or it becomes patchy, we risk all our records and scientific knowledge except those in hard copy and then these will not be generally available. The innovation we need will take a big hit. Few will know how to make plastic from starches, maybe a few dozen individuals [?]. Few will know how to farm, how to raise livestock, where to get seeds. All were once widespread skills. We westerners are far too specialised to become generalists overnight, and even if we could we will face a whole new world, with few ready resources, fewer fish and food of all kinds. Etc.

      • Don Stewart says:

        Dear MG and Others
        I don’t know if the Panasonic batteries will turn out to be some giant leap forward, or not. I know my sister was involved with Panasonic several years ago. She never told me much about it.

        I have said pretty consistently that I think that the best use for our remaining fossil fuels is to enhance the productivity of sunshine. For example, making plastic pipe to provide water to the paddocks in which cows are rotationally grazed. Or making the drip tapes for efficient irrigation systems. Or making the PV panels which pump water into high storage to utilize gravity for irrigation water distribution. All of these are hybrid systems which use both the industrial energy from fossil fuels PLUS the free energy from sunshine along with gravity.

        If you call those ideas ‘half and half’, then Musk’s idea is about ‘three quarters/ one quarter’. That is, three quarters fossil fuel (the PV panels and batteries) and one quarter the free sunshine.

        If the Musk solution is paired with passive solar design, then it gets closer to half and half.

        Don Stewart

        • MG says:

          Dear Don Stewart,

          where will the poor people earn money for the industrial products that support the agriculture? When we start to have problems with the transportation, the food production goes down immediately and there will not be people who will be able to afford the food produced by the famers. Almost everybody must become a farmer himslelf/herself.

          Yes, you can buy some plastic pipes, barrels etc. today when the system works. But that is probably all you can do. Anyway, there will be a lot of rubbish after the collapse of the energy production, so there should not be a problem e.g. to dig some plastic natural gas pipes out of the ground and use them for irrigation purposes etc. I think that the reuse of the elements of todays infrastructure will provide enough construction material for agriculture for surviving people under reduced soil productivity due to the lack of fertilizers.

          What makes the collapse sharper is the belief in the dying system. I. e. subsidized house prices crash, subsidized prices of oil crash, subsidized prices of food crash. When you take away the energy, all falls apart, the bubbles burst, the system atomizes (e.g. a lot of singles, a lot of divorced etc.).

          • We have been discussing this from many angles for a while.You have to specify the timelines and regional distribution you have in mind for each argument provided.

            For instance, given the fact demand destruction in frivolous activities have just barely started since 2008 (or 1970s peak of working lower middle class oppulence), there is no urgency for food supply problems yet, and say for next 2decades, speaking about the affluent west/north.

            We can simply will borrow additional time by “allowing for” further demand destruction as described here numerous times in detail (less personal car milage driven, less shopping consumption, less investment/repair into infrustructure, ..)

            You are right there might come a breaking point after which nature of the beast aka dying system will be revealed in plain sight for larger part of given population, but again even this dire situation could be turned over temporarily by TPTB, and some sort of stabilization on lower energy throughput forced on us all for a moment (decades on new plateau).

            I’ve been into “doom” for almost 2decades, lot of things indeed have and many have not happened yet, also the understanding of interplay between basic human nature and TPTB’s acquired skill over milenia how to sheppard sheeple through difficult times somewhat growths on students of these relationships.

            Our current system is a delicate machine developed over centuries, winding it down or crashing it down most likely can’t happen over few years time.That doesn’t mean trying proactively balanced out some of the larger gyrations is meaningless, no but the sky is not falling yet.

            • MG says:

              I always say that we should look to Japan, all the demographic phenomena of the declining population of a highly developed industrial country are happening there. The sky will not fall, but the population will. With an accelerating dynamics all over the world, as the people will be drained out of the energy that is needed for everyday life.

              There is no problem neither with the shelter, nor with the food, but with the energy for everyday life to keep the system together.

          • Don Stewart says:

            Dear MG

            To respond to you, I have to be repetitive of things I have said before. But I’ll try to be brief.

            Let’s put the issues in a Systems perspective. Our system is composed of subsystems (M&Ks Rule Number 1). Let’s consider some subsystems:
            Finance
            Fossil Energy and Nuclear
            Sunshine, falling water, gravity, photosynthesis
            Infrastructure which uses Fossil Energy and Nuclear
            Infrastructure which increases the human usefulness of sunshine, falling water, gravity, and photosynthesis
            Industrial fertilizer
            Recycled nutrients and nutrients produced by photosynthesis
            Population

            Gail recently said to someone that ‘we need to increase EROEI’. My proposal for increasing EROEI is to use Fossil Energy and Nuclear, along with the infrastructure which uses them, to provide infrastructure which increases the human usefulness of sunshine, falling water, gravity, and photosynthesis. We use less industrial, but more natural energy. This is the Appropriate Technology that John Michael Greer is always talking about. It’s not Stone Age, but neither is it Techno-Utopia.

            Appropriate Technology is a branch of Taoism…going with the flow rather than fighting it. Making sure you have south facing roofs (in the Northern Hemisphere) so that you have a good place to put a PV panel. Don’t try to pump sewage uphill. Use natural methods for cleaning sewage very close to the places it is produced. Catch water high up in the landscape and hold it there until you need it, or let it percolate down slowly in the soil. Passive solar design. All these are the design ideas which inspired the first Permaculture books back in the 1970s, and provided the inspiration for homes such as David Holmgren’s Melleodoro in Australia.

            The rebuilding of the home economy, with a proportional shrinking of the industrial economy and especially the financial system are part of the deal, as David Holmgren and David Kennedy and many others teach.

            In terms of climate change, if we adopt sane agricultural practices we can sequester in the soil all of the current carbon emissions. If we simultaneously reduce carbon emissions and adopt sane agricultural practices, then we will steadily reduce carbon dioxide in the air. Over the last 50 years, Polyface Farm (Joel Salatin’s place in Virginia) has sequestered 2 tons of carbon per acre per year. Joel has done this with no subsidies of any importance. I don’t know how much carbon Alan Savory has sequestered, but it has to be substantial. Jean-Martin Fortier in Quebec, on an intensively gardened acre and a half has achieved 14 percent soil organic matter in a little more than a decade.

            You mention fertilizer. If we want to sequester carbon, we need to stop using industrial nitrogen and herbicides and plowing. Which means that we need to put nitrogen into the soil through Christine Jones’ Liquid Carbon Pathway, with hay mulches, with raised bed keyhole gardens which recycle kitchen waste, with legumes, with Holistic Grazing, and so forth. All of these things can theoretically be done with Stone Age infrastructure, but they become vastly easier if we have some industrial infrastructure. For example, Holistic Grazing becomes very much easier if we have lightweight electric fences to define paddocks, and we have flexible plastic pipe to get water to each paddock. If the water is gravity fed from a high pond, then we have achieved an Appropriate Technology.

            Every time I have discussed such stuff with Gail, she comes back with ‘Yes, but the TBTF Banks will fail’. I see the willingness, or unwillingness, of our ‘polis’ to address the financial and political issues as critical, but not something I can do much about. I do not buy the argument that businesses cannot become less complex than they are today…businesses are run by humans who are clever. I would tend to agree that the TBTF banks have gone so far that they cannot reform themselves. But I also think they have become a dead weight on humanity, and we need to kill them as mercifully as possible. Then we get on with life.

            How many people will make it through these changes? I don’t know. I suspect that the limitation on survival is more about the willingness of people to do what they need to do, rather than the limitations on photosynthetic productivity. As Joel Salatin says, he ‘will believe food is in short supply when I see golf courses being plowed under’. As for the oft-repeated idea that we MUST support the old folks in Florida playing golf with the taxes of many young people…whoever came up with such a ridiculous idea to begin with?

            As I said in a recent post, I see two paths. One is some sort of ragged but fairly coherent public response, the other is the path of survival and thriving by the Jewish musician born in Warsaw who found his way to Moscow in the midst of WWII and the Cold War and the collapse of the Soviet Union.

            I don’t know what will happen. Paul Gilding thinks 2015 is the year things start to change:
            http://www.resilience.org/stories/2015-02-24/the-year-the-dam-of-denial-breaks-on-climate-change

            Don Stewart

            • Dear Don, we are on the same page regarding the “obvious solutions” you so richly put forward our attention to and explained well enough. However, I also do hear these “near criticality” warning signs by Gail and Nicole (and others) about looming system reset, where I’m interested mainly in the propabilities of diverse scenarios what comes next. It could be wide range of possibilities, ranging from eco-totalitarianism to smaller scale BAU muddlethroughism aka feudal oligarchism. Given the regional differences, I’d say it is “easy” to risk it anyway on the right thing to do in land bonanza places like the US, Canada perhaps even Russia (although even as russian you need permits to settle in the wilder regions), but I’d be a bit hesitant to “bail out of the system” in land space disadvantaged places like Europe, ME and China.

            • Don Stewart says:

              Dear worldofhanuman
              Europe is currently producing more food than it can sell, so it is imposing production restrictions. China has historically produced an enormous amount of food in very close proximity to huge cities such as Shanghai and Hong Kong. That may be changing in the last decade or so, but it is a choice, not a destiny. In the Middle East, food production can increase if they simply kill and eat all the wild goats.

              If you take a look at Geoff Lawton’s video Greening The Desert, you will see that food production is not impossible in the worst place in the world…the Dead Sea Valley with salted up land. BUT, Geoff has access to industrial machinery such as excavators to move the dirt around to make water retention earthworks. If he were trying to do it with Stone Age technology, it might be impossible (without slave labor). Once the earthworks are in place, he does not use artificial fertilizers, he doesn’t use herbicides, and he doesn’t plow. This permits colonization by microbes which sequester carbon in the soil and thus retain water, and also, by methods we don’t understand, immobilize the salt.

              I don’t think the worst places in the Middle East are likely to the cheapest places to produce food, and it may be that they will simply become empty. But producing some food there is not impossible.

              Don Stewart

    • Olsen says:

      Hydrogen to power Shipping

      Ocean tunnels can make electricity cheap at off-peak times. This will reduce the cost of recharging batteries of electric vehicles at night.

      It will also reduce the cost of producing hydrogen at off-peak hours. To power ships crossing the oceans, hydrogen looks more cost-effective, as such ships cannot return to base for a nighly battery recharge. Such ships have plenty of cargo space to carry hydrogen, even when the hydrogen is not highly compressed. Some of the world’s largest ports are close to strong ocean currents.
      http://www.arctic-news.blogspot.ca/

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